- USD/CNH remains under some selling pressure for the second successive day.
- The mixed Chinese PMIs fail to provide any meaningful impetus to the pair.
- Acceptance below the 50-day SMA supports prospects for additional losses.
The USD/CNH pair drifts lower for the second successive day and drops to a two-day low, around the 7.1330 area after the release of mixed Chinese PMI prints for July during the Asian session on Monday. Spot prices, however, manage to rebound a few pips in the last hour and currently trade around the 7.1420 region, down just over 0.15% for the day.
In fact, data released by China’s National Bureau of Statistics (NBS) showed that the official Manufacturing PMI improved from 49 in the previous month to 49.3 in July, though remains in the contraction territory. Meanwhile, the gauge for the services sector dropped to 51.5 during the reported month as compared to 53.2 in June. That said, hopes for additional stimulus from China turn out to be a key factor exerting some pressure on the USD/CNH pair.
From a technical perspective, last week's convincing break and acceptance below the 50-day Simple Moving Average (SMA) was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have been gaining negative traction and support prospects for a further depreciating move. That said, it will be prudent to wait for some follow-through selling below the 7.1170-7.1160 horizontal support before placing fresh bearish bets around the USD/CNH pair.
Spot prices might then turn vulnerable to accelerate the slide to the 7.1040-7.1035 region en route to the 7.1000 round-figure mark. The fall could get extended further towards the next relevant support near the 7.06550 area.
On the flip side, the 50-day SMA, currently pegged around the 7.1720 zone, might continue to act as an immediate hurdle ahead of the 7.1775-7.1780 supply zone and the 7.1910-7.1915 region. This is followed by a resistance marked by a descending trend-line extending from the June swing high, around the 7.2135-7.2140 area. A sustained strength beyond the latter will negate any near-term negative bias and pave the way for some meaningful upside for the USD/CNH pair
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